The Collective Investment Schemes (Conduct of Business and Miscellaneous Provisions) Regulations, 2007

STATUTORY INSTRUMENTS
SUPPLEMENT No. 24
10th September, 2007

STATUTORY INSTRUMENTS SUPPLEMENT
to The Uganda Gazette No. 49 Volume C dated 10th September, 2007
Printed by UPPC, Entebbe, by Order of the Government.

# STATUTORY INSTRUMENTS
## 2007 No. 43.
THE COLLECTIVE INVESTMENT SCHEMES (CONDUCT OF BUSINESS AND MISCELLANEOUS PROVISIONS) REGULATIONS, 2007.

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## ARRANGEMENT OF REGULATIONS

### Regulation

#### PART I—PRELIMINARY
1. Title
2. Interpretation

#### PART II—STANDARDS OF CONDUCT
##### Division A—Fitness and Properness
3. Criteria for judging fitness and properness
4. Other matters which the Authority may take into account

##### Division B—Compliance with Regulations and Special Conditions
5. Requirement to comply

#### PART III—CONDUCT OF BUSINESS
##### Division A—Seeking CIS Customers and Advertising for Business
6. Issue and approval of CIS investment advertisements
7. Issue and approval of CIS published recommendations
8. Approval procedure and records
9. Submission of CIS investment advertisement or CIS published recommendation to trustee or depositary

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### Regulation

10. Restrictions and content of CIS direct offer advertisements
11. Prohibitions on inducements
12. Maintenance of records

##### Division B—Dealing, Managing and Advising
13. Suitability of transactions
14. Dealing fairly and in due turn
15. Requirements for timely execution
16. Best execution
17. When not to provide best execution
18. Timely allocation of transactions
19. Recording allocation
20. Re-allocation
21. Fair allocation of aggregated orders
22. Price at which allocations are to be effected
23. Application of uniform standards
24. Prohibition of insider dealing
25. Requirement to notify the Authority

##### Division C—Fair and Clear Communication
###### Reporting Transactions
26. Requirement to ensure fair and clear communication
27. Duty to report
28. Form and content of reports
29. Time limits for reporting
30. Other reporting requirements
31. Providing essential details of transactions

##### Division D—CIS Customer Money
32. Duty to obey CIS customer money regulations
33. CIS customer money
34. CIS customer money bank

##### Division E—Anti-Money laundering
35. Compliance with relevant legislation

##### Division F—Management of Collective Investment Schemes
36. Material interests and conflicts of interest

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### Regulation

37. Fair treatment

##### Significant Influence over Company Management
38. Acquisition of securities carrying voting rights
39. Operator to reduce influence
40. Definition of significant influence

##### Pricing Controls
41. Application of regulations
42. Source of share prices and currency rates
43. Valuation agents
44. Reconciliation
45. Inclusion of investment transactions in valuations
46. Prices obtained otherwise than from the main pricing source
47. Investment and borrowing procedures
48. Unapproved securities
49. Dividends, interest and expenses
50. Tax positions relevant to a licensed scheme
51. Valuation limits
52. Cash
53. Recording of CIS shares or units in issue
54. Verification by investment adviser of assets of licensed scheme
55. Review by depositary or trustee of operator’s controls and systems
56. Recording and reporting by operator
57. Reporting by depositary or trustee

##### Division G—Depositary and Trustee Activities
58. Application of regulations
59. Exception to regulation 58
60. Use of Permitted Third Party (PTP)
61. Depositaries or trustees of licensed collective investment schemes

##### Compliance, Reporting and Records
62. Maintenance of records
63. Notification to approved bank
64. Post-dated cheque

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### Regulation

65. Discharge of fiduciary duty
66. Payment of money into CIS customer bank account on instruction of Authority
67. Segregation of CIS customer money
68. Reconciliation
69. Scheme money to be held with approved bank
70. Segregation of scheme money
71. Payment of scheme money into scheme money bank account
72. Payment of money into trust bank account on instruction of Authority.
73. Accounting records
74. Nature of accounting records
75. Audit trail
76. Retention of records
77. Reconciliation of depositary’s or trustee’s records with approved bank’s records
78. Failure to perform reconciliations
79. Notification to Authority on default of approved bank
80. Auditor’s report
81. Submission of Auditor’s report

#### PART IV—COMPLIANCE, REPORTING, RECORDS AND COMPLAINTS
##### Division A—Compliance, Inspections and Records
82. Compliance by officers and employees with regulatory system
83. Appointment of compliance officer
84. Written statement of compliance procedures
85. Supervision of company representatives
86. Contracts of employment and contracts for services
87. Undertakings required
88. Consequence of breach
89. Written statement of representation
90. Form and contents of written statement of representation
91. Time limits for submission of written statement of representation
92. Compliance by officers and employees with statutory restrictions on insider dealing

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### Regulation

93. Compliance by officers and employees with personal dealing arrangements
94. Prohibited dealings
95. Notification of dealings
96. Disclosure of office or employment
97. Record of consent
98. Notification of transactions effected
99. Observance by connected persons

##### Access and Inspections by the Authority
100. Access and inspections by Authority
101. Extension of regulation 100
102. Co-operation by licensed persons

##### Records
103. Record keeping requirements
104. Records to be kept
105. Form of records
106. Inspection of records relating exclusively to one CIS customer
107. Inspection of other records
108. Destruction of records or files
109. Licensed persons not to employ disqualified persons

##### Division B —Notifications
110. Clearance events
111. Requirement for notification
112. Clearance procedure: the waiting period and stop notices
113. Clearance event not in licensed person’s control
114. Expiry of waiting period
115. Stop notice: effect on licence

##### Notifications Required to be Made to the Authority
116. Notifiable events
117. Form, contents and time limits
118. Annual notification of controllers

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### Regulation

##### Division C—Complaints
119. Complaints procedure: general
120. Contents of significant complaints procedure
121. Returns to Authority
122. Co-operation with Authority
123. Authority’s investigation

##### Division D—Controls and Systems Rules
124. Adequacy of controls and systems
125. Proper discharge of duties
126. Validity of system
127. Use of Permitted Third Party (PTP)

## SCHEDULES
SCHEDULE 1 CIS LICENSED PERSON PRINCIPLES
SCHEDULE 2 CIS ADVERTISING CODE
SCHEDULE 3 STATEMENT OF REPRESENTATION
SCHEDULE 4 NOTIFICATIONS
SCHEDULE 5 REPORTING TRANSACTIONS
SCHEDULE 6 CONTRACT NOTE

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## STATUTORY INSTRUMENTS
### 2007 No. 43.
The Collective Investment Schemes (Conduct of Business and Miscellaneous Provisions) Regulations, 2007.
(Under sections 30, 31 and 84 of the Collective Investment Schemes Act 2003, Act No. 4 of 2003)

IN EXERCISE of the powers conferred on the Capital Markets Authority by sections 30, 31 and 84 of the Collective Investment Schemes Act, 2003, these Regulations are made this 29th day of April, 2005.

### PART I—PRELIMINARY

#### 1. Title.
These Regulations may be cited as the Collective Investment Schemes (Conduct of Business and Miscellaneous Provisions) Regulations, 2007.

#### 2. Interpretation.
(1) In these Regulations, unless the context otherwise requires—
“accounting reference date” means the date to which a licensed person’s accounts are prepared in order to comply with the Companies Act or, in the case of a licensed person not subject to the Companies Act, the equivalent date selected by the licensed person;
“Act” means the Collective Investment Schemes Act, 2003;
“advertisement” includes every form of advertising, whether in a publication, by the display of notices, signs, labels or show cards, by means of circulars, catalogues, price lists or other documents, by an exhibition of pictures or photographic or cinematographic films, by way of sound broadcasting or television, by the distribution of recordings by electronic display or distribution, or in any other manner;

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**Explanation: See also the following defined terms: CIS investment advertisement, CIS direct offer advertisement, specific CIS advertisement and CIS investment services advertisement.**

“advertiser” means any person by whom an advertisement is issued or caused to be issued, whether or not that person takes direct responsibility for the contents, timing or medium of the advertisement.

“advertising regulations” means regulations 6, 7 and 10;

“ancillary” in relation to an investment, means any right to an interest in that investment which is apportioned to that investment;

“annual accounts” means accounts prepared to comply with the Companies Act or other statutory obligations;

“applicant” means a person who has applied, or is in the course of applying, to the Authority to be a licensed person;

“appointed representative” means a person—
(a) who is employed by a licensed person (his or her “principal”) under a contract for services which requires or permits him or her to carry on investment business; and
(b) for whose activities in carrying on the whole or part of that investment business his or her principal has accepted responsibility in writing;

“approved bank” means an institution which is authorised as a bank under the Financial Institutions Act;

“associate” means—
(a) an undertaking in the same group as that person; and
(b) an appointed representative of the first person or of any undertaking in the same group; and

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(c) any other person whose business or domestic relationship with the first person or its associate might reasonably be expected to give rise to a community of interest between them which may involve a conflict of interest in dealings with third parties;

“associated business” means business which is carried on in connection with CIS investment business;

“Authority” means the Capital Markets Authority established by the Capital Markets Authority Act;

“Authorised Corporate Director” or “ACD” has the meaning given under section 2 of the Act;

“best execution” in relation to the effecting of a transaction means the effecting of that transaction in compliance with regulation 16;

“body corporate” includes a body corporate constituted under the law of a country or territory outside Uganda;

“Chief Executive” includes any person occupying the position of chief executive or managing director (whether solely or jointly), by whatever name called;

“Chinese Wall” means an arrangement within the organisation of a licensed person or between a licensed person and any associate of that licensed person, which requires information obtained by the licensed person or, as the case may be, associate, in the course of carrying on one part of its business of any kind to be withheld in certain circumstances from persons with whom it deals in the course of carrying on another part of its business of any kind;

“CIS advertisement” means any advertisement inviting anyone to enter or offer to enter into a Collective Investment Scheme Agreement or to exercise any rights conferred by a Collective Investment Scheme Agreement to acquire, dispose of or convert units or shares in a Collective Investment Scheme or containing information calculated to lead directly or indirectly to anyone doing so;

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“CIS advertising code” means the advertising code issued by the Authority under section 34 of the Act and set out in Schedule 2;

“CIS customer” means—
(a) any person to whom the licensed person provides or has provided CIS investment services; or
(b) a customer of an appointed representative of a licensed person with or for whom the representative acts in the course of CIS investment business for which the licensed person has accepted responsibility;
and includes an indirect customer and a potential customer but does not include—
(i) a market counterparty;
(ii) a trust beneficiary other than a holder of a unit in a unit trust;

“CIS customer agreement” means an agreement to the formation documents of a licensed scheme signified by the acquisition of units or shares in a licensed scheme;

“CIS customer money” means any amount of money received before a dealing day by an operator for the purchase of a share or unit in a collective investment scheme or any amount of money held by an operator as a result of a redemption of a share or unit in a collective investment scheme beyond the prescribed period for redemption;

“CIS customer money regulations” means regulation 32 to 34 and regulations 63 to 68;

“CIS customer title document” in relation to a CIS, means a document of title or certificate evidencing a CIS customer’s title to units or shares in a CIS and may also be construed to include an electronically maintained record where the CIS customer has the right to obtain a paper copy of the entry referring to his or her holding;

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“CIS customer order” means an order for a purchase or sale or conversion of units or shares of a collective investment scheme;

“CIS direct offer advertisement” means a specific CIS investment advertisement (including a pre-printed or off-the-screen advertisement) which—
(a) contains—
(i) an offer by the licensed person or another offeror to enter into a CIS agreement with anyone who responds to the advertisement; or
(ii) an invitation to anyone to respond to the advertisement by making an offer to the licensed person or another offeror to enter into a CIS agreement; and
(b) specifies the manner or indicates a form in which any response is to be made (for example by providing a tear-off slip);

“CIS investment business” means the business of engaging in one or more of the activities comprised in the establishment or operation of a Collective Investment Scheme;

“CIS investment services” means activities undertaken in the course of carrying on CIS investment business;

“CIS investment services advertisement” means any advertisement promoting the business of a licensed person under the Act;

“CIS order” means an order to acquire or dispose of investments on behalf of a collective investment scheme;

“CIS published recommendation” means any journal, tipsheet, broker’s circular or other publication (including publication by sound broadcasting or television) which contains the results of research into, or analysis of factors likely to influence the future performance of CIS investments, or advice or recommendations based on such results, and which

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is issued by or on behalf of a licensed person to the public or selected sections of the public, including members of the public who are CIS customers or potential CIS customers of the licensed person responsible. A communication of which the main body or import is common to a number of such communications may be a published recommendation notwithstanding that the introduction of presentation of each such communication is so worded or arranged as to appear to make it a personal communication;

“clearance event” means any of the events referred to as a clearance event in regulation 110;

“close relative” in relation to an individual, means that individual’s spouse, brother, step-brother, sister, step-sister, parent, step-parent, child (natural or adopted) or step-child but excluding any such relative over whom the individual can show on reasonable grounds that he or she has no significant influence;

“collective investment scheme” has the meaning given in section 3 of the Act;

“company representative” in relation to a licensed person or an appointed representative of a licensed person (whether the licensed person or the appointed representative is a company or not), means an individual who is—
(a) the appointed representative himself or herself if the appointed representative is a sole trader; or
(b) an employee, partner or officer of the licensed person or of the appointed representative, as the case may be,
and whose activities include procuring or endeavouring to procure persons to enter into CIS agreements, or giving advice to the persons with whom he or she deals about entering into CIS agreements or exercising rights conferred by CIS shares or units;

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“complainant” means a holder of units or shares in any Collective Investment Scheme of which a licensed person is or was at the time of the complaint, the operator or trustee or depositary;

“complaint” means an expression of dissatisfaction made by or with the authority of a complainant to a licensed person or any appointed representative of the licensed person concerning one or more collective investment schemes not being a complaint solely related to the performance of the investment which is the subject of the collective investment scheme;

“compliance officer” means the individual from time to time appointed by a licensed person as responsible for compliance matters;

“compliance procedures” means the compliance arrangements and procedures required to be established and maintained by each licensed person in accordance with Part IV;

“connected person” in relation to a person, means for the purposes of regulations 94 to 99, anyone connected with him or her by reason of domestic or business relationship (other than as arises solely because that person is a customer of the licensed person) such that the officer or employee has influence over that person’s judgment as to how to invest his or her property or exercise any rights attaching to his or her Investments;

“controller” means—
(a) in relation to a body corporate, a person, who, either alone or with any associate or associates, is entitled to exercise, or control the exercise of, 15 per cent or more of the voting power at a general meeting of the body corporate or another body corporate of which it is a subsidiary; and
(b) in relation to an unincorporated body—

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(i) any person in accordance with whose directions or instructions, either alone or with those of any associate or associates, the officers or members of the governing body of the association are accustomed to act (but disregarding advice given in a professional capacity); and
(ii) any person who, either alone or with any associate or associates, is entitled to exercise, or control the exercise of, 15 per cent, or more of the voting power at any general meeting of the association,
and, for the purposes of this definition, “associate”, in relation to any person, means that person’s wife, husband, minor child or step-child, any body corporate of which that person is a director, any person who is an employee or partner of that person and, if that person is a body corporate, any subsidiary of that body corporate and any employee of any such subsidiary;

“controls and systems regulations” means regulations 124 to 127;

“current CIS customer order” includes both a CIS customer order for immediate execution and, once the condition is fulfilled, a CIS customer order which is only to be executed on fulfilment of a condition;

“current CIS order” includes both a CIS order for immediate execution and, once the condition is fulfilled, a CIS order which is only to be executed on fulfilment of a condition;

“currency point” has the meaning given in section 2 of the Act;

“customer bank account” means an account complying with the requirements of regulation 33;

“customer title document” in relation to an investment, means a document of title, or certificate evidencing a customer’s title, to that investment;

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“CIS customer transaction” means a transaction executed or to be executed as an agent of a CIS customer;

“dealing day” means the period in each business day (or in each other day when the Manager or ACD is open for business) during which the Manager or ACD keeps his or her premises or any of them open to the public or is otherwise publicly available for business of any kind;

“dealing period” means the period between a valuation point and the next valuation point;

“depositary” has the meaning given in section 2 of the Act;

“director” means, in relation to—
(a) a body corporate, a person occupying in relation to it the position of a director (by whatever name called) and any person in accordance with whose directions or instructions (not being advice given in a professional capacity) the directors of that body are accustomed to act; and
(b) a person which is not a body corporate—
(i) in the case of a partnership, a general partner; and
(ii) in the case of an unincorporated association, any member of the governing body or other equivalent persons;

“discretionary customer” means a customer for whom a licensed person exercises, or may exercise discretion in relation to the investment of assets belonging to that customer;

“discretionary transaction” means a transaction to which a licensed person executes or proposes to execute in the exercise of discretion;

“eligible custodian” in relation to a licensed person means—
(a) an eligible nominee;
(b) an approved bank;

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(c) a body corporate which maintains its head office outside Uganda and whom the licensed person reasonably believes to be a person—
(i) whose business includes the provision of investment custodial services; and
(ii) who, in providing those services is subject to regulation and supervision by a regulatory body or agency of government in the country in which that person carries on that business or to independent review (not less frequently than annually) by auditors with qualifications prescribed by law or prescribed by such a body or agency;

“eligible nominee” means—
(a) an individual chosen by the customer or CIS customer who is not known by the licensed person to be an associate of the licensed person;
(b) a corporate nominee with no other business; or
(c) an approved bank.

**Explanation: A “corporate nominee” means a nominee which is a company.**

“execution-only customer” means a customer or CIS customer who, in relation to a particular transaction, can reasonably be assumed by the employee of the licensed person who deals with him regarding that transaction not to be relying on the licensed person to advise him or her on, or to exercise any judgment on his or her behalf about, the merits of or the suitability for him or her of that transaction;

“financial business” means business which is, or which is held out as being primarily for the purpose of investment;

“formal guidance” means guidance which is intended to have continuing effect and is issued by the Authority—

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(a) generally or to a class of persons; and
(b) in writing or other legible form;

“formation documents” has the meaning given in section 2 of the Act;

“holding company” has the meaning given in section 154 of the Companies Act;

“independent intermediary” means a licensed person which is not in relation to a scheme, the operator of that scheme or its marketing group associate and which provides investment services in respect of packaged products;

“indirect customer” means, where a customer is known to be acting as agent, an identified principal who would be a customer if he or she were dealt with direct;

“inducement” does not include—
(a) disclosable commission; or
(b) goods or services which can reasonably be expected to assist in the provision of CIS investment services to customers and which are provided or to be provided under a soft commission agreement;

“inspection” is an inspection of whatsoever kind carried out by the Authority under regulation 100 or 101;

“inspection team” means any employees of the Authority and any agent or agents appointed by the Authority to assist with a particular inspection;

“intervention” means a requirement or prohibition imposed on a licensed person under Part IX of the Act;

“investigation” is an investigation under Part XI of the Act;

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“investment” means any asset, right or interest held under an investment agreement including, in relation to an investment, where the context permits, an ancillary on that investment;

“investment advertisement” means a CIS advertisement or a CIS investment services advertisement inviting a person to enter or offer to enter into an investment agreement or to exercise any rights conferred by an investment to acquire, dispose of, underwrite or convert an investment or containing information calculated to lead directly or indirectly to anyone doing so;

“investment adviser” has the meaning given in section 2 of the Act;

“investment agreement” means any agreement, the making or performance of which by either party constitutes an activity which is regulated under the Act or the Capital Markets Authority Act;

“investment company with variable capital” has the meaning given in section 19 (2) of the Act;

“investment manager” means a person who, acting only on behalf of a customer, either—
(a) manages an account or portfolio in the exercise of discretion; or
(b) has accepted responsibility on a continuing basis for advising on the composition of the account or portfolio;

“investment transaction” means the purchase or sale of an investment;

“licensed person” means a person (being a body corporate) licensed under section 8 of the Act and includes the trustee and depositary, the unit trust manager, the Authorised Corporate Director and the scheme investment manager;

“licensed open ended investment company” means an open-ended investment company licensed under the Act;

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“licensed scheme” means a Collective investment scheme for the time being licensed by the Authority;

“licensed unit trust manager” means the operator of a licensed unit trust scheme for the time being licensed by the Authority under the Act;

“licensed unit trust scheme” means a unit trust scheme for the time being licensed by the Authority under the Act;

“licensing procedures” means the procedures set out in the notice issued by the Authority, together with any other procedures which the Authority resolves, either generally or in relation to any specific case, should apply to the licensing of persons under the Act;

“listed money market institution” means a money market institution for the time being listed by the Authority;

“manager” in relation to a person, means an employee who, under the immediate authority of the governing body of that person, is responsible, either alone or jointly with one or more other persons for the conduct of that person’s business, and in relation to a licensed unit trust scheme, means the manager of the scheme;

“market counterparty” means a person dealing with the licensed person—
(a) as principal or as agent for an unidentified principal; and
(b) in the course of investment business of the same description as that in the course of which the licensed person acts;

“marketable investment” means—
(a) an investment which is traded on or under the rules of a recognised or designated investment exchange; or
(b) any loan stock, bond or other instrument creating or acknowledging indebtedness issued by a government, local authority or public authority;

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(c) money market instruments that are dealt in on a regulated market and which are liquid and whose value can be determined at any time, including certificates of deposit and commercial paper;

“market maker” in relation to an investment of any description, means a person who (otherwise than in his or her capacity as the operator of a regulated Collective Investment Scheme) holds himself or herself out as able and willing to enter into transactions of sale and purchase of investments of that description at prices determined by him or her generally and continuously, rather than in respect of each particular transaction;

“material interest” in relation to a transaction, does not include—
(a) disclosable commission on the transaction; or
(b) goods or services which can reasonably be expected to assist in the provision of CIS investment services to customers and which are provided or to be provided under a soft commission agreement;

“non CIS customer agreement” means any agreement in writing relating to services other than CIS investment business to which a licensed person and a customer of the licensed person are parties;

“non CIS customer” means any person to whom the licensed person provides services other than CIS investment services;

“non CIS customer transaction” means a transaction executed or to be executed as an agent of a non CIS customer but does not include an own account transaction;

“notifiable event” means an event or circumstance specified in Part II of Schedule 4;

“officer”—
(a) in relation to a body corporate, means any director or secretary;

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